A host of new figures suggested a bleak beginning to 2008 for the British economy yesterday. Just 24 hours after a trio of high-street firms issued profit warnings, the Nationwide Building Society's consumer confidence index slipped 12 points from 98 to 86, its largest monthly fall since it began in May 2004. Attitudes towards spending in the next six months slumped the most.
Separately, like-for-like retail sales rose by 1.2 per cent last month, 0.2 per cent down on the previous month and half the average of last year. During a mild November, sales of women's fashion struggled while furniture and DIY sales were flat because of the property slowdown.
The British Retail Consortium, which released the figures, said that shops had started cutting prices in the last week of the month to stimulate sales. More discounts are expected in the coming weeks as retailers seek to shift seasonal stock.
The Nationwide, which bases its index on interviews with 1,000 people, predicted sales of big-ticket items such as cars and houses would suffer in the coming months as people became more cautious. Around 57 per cent of people thought last month was a bad time to make a major purchase, up from 51 per cent in October, while just 35 per cent thought it was a good time to buy household goods, compared with 40 per cent the previous month.
Britain's biggest building society said the fall was expected, given the gloomy news of recent months continuing worries about the availability of credit, petrol passing the 1-per-litre barrier and higher food prices.
"Uncertainty about the effects of the credit crunch, together with rising oil and food prices seem to be affecting feelings about jobs and the future economic situation. With this in mind, it is natural consumers would think about tightening their belts this Christmas," said the Nationwide's chief economist, Fionnuala Earley.
She expected at least two interest rate cuts next year would take pressure off household finances. A cut could come as soon as tomorrow as the Bank of England's Monetary Policy Committee meets, though economists think it will probably save cuts for next year.
Cheapening credit might breathe some life back into the housing market, which last month suffered its largest monthly fall for 12 years in November, knocking about 2,000 off the price of the average home.
Paul Smith, chief executive of Haart estate agency, said the registration of first-time buyers slumped by 41 per cent year-on-year in October, partly as a result of fewer mortgage products being available. But he predicted the market would bounce back by the middle of 2008.
The British Retail Consortium, too, was confident shops would survive this Christmas despite the difficulties. Its spokesman, Richard Dodd, said: "For retailers, there is still reasonable optimism that we will get like-for-like growth of 3 per cent, but bearing in mind that doesn't include inflation, that will be very modest." The organisation predicts that Christmas spending will reach 12bn.Reuse content